Source: NMHS Newsletter, August 2002

Early Indiana Money

At an early date the currency of the day or the circulating medium, particularly in the locality watered by the Wabash had only a local value, redeemable almost exclusively in consideration for land, etc. purchased of the State. The following were the chief issues and in their day were well known.

In 1840, the Legislature of Indiana authorized and directed the issue of scrip which in time came to be known as "old scrip" bearing interest at the rate of six per cent per annum, and was receivable to State and county taxes and for the payment of certain other specific obligations. Since it was not receivable at par for all purposes, for many years it was taken only at a discount sometimes at a very heavy rate. Yet, in the course of time, a large amount of interest having accumulated in these evidences of debt guaranteed by the State, it was worth more than the face, and was for that reason a source of speculation in the hands of persons who were able to purchase it at a large discount and by so doing were able to realize large sums from small investments.

Bank scrip was another issue by the State to pay off a debt due the State Bank of Indiana for money advanced to contractors for the construction of the canal (Wabash and Erie) to carry on the public works of the State forwarded under the act known as the "Internal Improvement" law. This was of less value than the "old scrip" but in the end became a subject of speculation by the same process.

During the year 1840 the work on the Wabash and Erie Canal

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progressed very slowly since there was no money to pay contractors except such as arose from the sale of canal lands, an amount equaling about twenty-five per cent of the work done. On a settlement with the contractors, the Chief Engineer, Jesse L. Williams, issued the drafts to the holders of claims, one on red paper for twenty-five per cent, to be paid on presentation to the Fund Commissioner which was called "Red Dog," and another for the unpaid balance of seventy-five per cent on white paper, which was called "White Dog" to be paid by the Fund Commissioners as the land sold should furnish the money. Mr Williams wanted the State to provide for the payment at an earlier date than that agreed but the State failed to do anything so Mr. Williams engraved something appearing to be a bank bill of very low value.. This second "White Dog became subject of vast speculation in the hands of parties having an opportunity to get quantities of it. It bore interest however from the date of issue and was received in payment for canal lands.

Blue Dog was an issue authorized by the Legislaure of 1841-42 for the extension of the canal on the western division. Thus the State followed the example of Mr. Williams. This issue was on paper of a blue tinge; hence its name "Blue Dog." It was receivable also for canal lands and the subject of much speculation like other similar issues.

Blue Pup was another currency issued in small bills by contractors for work, material and necessities and payable in "Blue Dog" when presented at the proper office in sums of $5. This, giving character to issues of this class, originated from the "wild cat" money, which in the year 1836 was so plentiful in Michigan and proved so worthless. A dog, being considered a valueless thing, the word was applied to the canal land scrip and the "Red Dog" " Blue Dog" "Blue Pup" which went into use on the Maumee and in the Wabash valley at accommodating rates.

These issues of scrip with sometimes unpaid county orders or more valueless city orders and the issues of suspended banks constituted the circulating medium in the localities where they were recognized at all during the period from 1840 forward until that species of paper went into disuse from force of circumstances. The evil consequences resulting from the uncertain value of these various issues produced a financial revolution in the past that required long years to repair the wrong done to the credit and energy of the people.

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